Cross-Border Payments for Digital Native Economies

1 Cross-Border Payments for Digital Native Economies: Unlocking Speed and Efficiency One less obvious synergy is that digital native companies are often at the forefront of leveraging new technologies and alternative payment methods for making cross-border payments. One driver of this trend is that digital native companies regularly expand into new markets, where end- to-end digitization and the ability to make fast and efficient cross-border payments is a foundational pillar for launching high-quality services. Additional drivers behind the increased uptake of new technologies include increased pressures to improve efficiency and reduce cost — a theme we expect to see elevated on boardroom agendas given the impact of the COVID-19 pandemic. Evolving e-commerce landscape • e-commerce: In recent years consumer spending on luxury goods has become globalized, as consumers have gained easier access to lesser-known global brands. It is common for the suppliers of online sellers to be small in size; many are small businesses selling goods via online marketplaces or individuals offering services through the digitally-enabled freelancing and gig economies; app developers, social media “influencers,” property rentals, ride-hailers. This shift in consumer spending and the profile of suppliers has resulted in higher volume, lower value payments. • Payment service providers are increasingly attractive to small and medium-sized businesses, underpinned by simplified services, improved end user experience, high service standards and easy to digest pricing. By default, flows processed through fintechs — as payment aggregators — are often higher volume, lower value cross-border payments, and access a wider range of payment currencies. “Higher volume, lower value cross-border payments across digital native economies place increased importance on providing cross-border payment solutions that unlock speed and efficiency. This is especially true for those companies breaking into new markets, planning their next funding round or launching an IPO. Citi’s unparalleled global network and material investments in cross-border payments has allowed Citi to take huge strides forward with developing alternative payment methods that offer more choice and convenience,” says Amit Agarwal, Citi’s Global Head of Cross-Border Payments, Treasury and Trade Solutions. The importance placed on the speed of cross-border payments has increased in recent years, according to Jody Perla, Managing Director, Global Banking and Payment Infrastructure at Payoneer. “For years now, we’ve seen a growing trend where speed is becoming more important in international payments. As consumers, we’ve become accustomed to accessing information in real time, and seeing an instant movement of money at little to no cost. These expectations are carried over to cross-border commerce and B2B payments as well.” The current climate of COVID-19 has heightened these trends, with e-commerce growing as rapidly as at any point in the previous decade. “Every day in April saw the same level of e-commerce activity as Black Friday of the previous year,” says Perla. “As part of that boom, the cross-border component also picked up significantly. At the same time, in the service sector, we’ve seen more people turning to freelancing and the gig economy, especially as remote work became the norm for so many.” These trends have emphasized the need for fast, efficient and streamlined payments. “Additionally, with so many people now out of full-time work, the shift to freelancing is exploding,” explains Perla. “Immediate access to funds is more important than ever. If in January, you had a cushion and could afford to wait to receive payments, that safety net is no longer available for many. To meet these needs, Payoneer is continuously working on enhancing our platform, including looking for ways to speed up the delivery of payments, and by adding additional financial services that our clients need, like access to working capital or the ability to collect payments globally.” Digital native companies include e-commerce businesses, such as online marketplaces and data streaming services, and fintechs, such as nonbank payment service providers. Despite covering a wide range of business models, companies in this segment have clear synergies. Most obviously, goods and services are delivered digitally, online and without a brick and mortar shopfront.